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Statutes of Repose Changes Can Throw a Wrench Into Construction Company or Property Owner Liability

October 06, 2016

By Eugene R. Scheiman

If you are the CEO or owner of a real estate development company, or of a general contracting company, you may be faced with injury claims to parties or property based on faulty construction. You count on contractors to provide adequate defenses and indemnification that will protect you from for those claims. Recent changes in the law may change that protection. It’s important to understand the changes, and know who to call should you find yourself in a position of unexpected liability as a result.

State statutes of limitations and statutes of repose are designed to bar an allegedly injured party from filing a claim after a specified time has elapsed. The starting time from which the calculation of the limitations period or the repose period can vary, but typically begins at the time an injury occurs, or when a deficiency was (or should have been) discovered. In other words, from the date of “substantial completion.” That phase may now have new meaning.

Because an injury or discovery of a defect in construction may occur years after work has been completed, liability under statutes of limitations may run indefinitely. To counter this never-ending liability, states enacted statutes of repose, placing a finite period during which suits by injured parties can be brought against owners, professionals and contractors. (As to parties covered by such statutes, each state’s laws must be consulted.) But recent changes in the law with respect to statutes of repose could evolve into a trend leaving officers, owners and general contractors involved in real estate development exposed when subcontractor liability expires prior to yours.

A recent opinion of the Colorado Court of Appeals (Sierra Pacific Industries, Inc. v. Jason Bradbush, (2016 COA 137)) has moved the ball with respect to when “substantial completion” is to be found. Briefly, in Bradbush, a subcontractor finished its work on a large construction project in 2004. The general contractor then finished its work, and reached substantial completion of the project in 2011. With respect to the subcontractor, the Colorado Court adopted a 1997 Texas Appeals Court decision, and ruled that different repose periods may be realized for individual contractors. As this has happened now in two states, this could be a trend worth watching.

Suppose a subcontractor completes work at the beginning of a project (let’s say pile placement), and then the general contractor reached substantial completion some years later. A defect in the piling then causes injury to property or person because of settling, and neither the statute of limitations nor the statute of repose has run for the general contractor.

In this case, with regard to the recent changes, the party actually causing the injury by deficient work is not subject to suit as it has the protection of the statute of repose based on its “substantial completion.” So, the general contractor, and in some instances, the owners, are the only parties not protected by the statute of repose and thus could be forced to pay damages. In addition, depending on the state, indemnification clauses subject to statutes of limitation may not be extended by statute of repose.

It’s critically important to engage a firm that is familiar with the trends and changes in statute of repose laws from state to state. When do the state statutes of limitation and repose run? Who is covered thereby? Does state statute have differing periods for latent and patent defects in construction and/or design?

In light of the Texas and Colorado decisions, developers, owners, professionals and contractors to must seek counsel as early as possible in liability situations so as to get a realistic assessment of each parties’ exposure, and to quickly obtain tolling agreements so as to keep liability alive with respect to those with whom you have contracted. Having the right lawyer on your side who has experience and knowledge in this area, and who will intelligently and aggressively pursue innovative defenses on behalf of their clients, is incredibly important. These issues can be outcome-determinative as to proper parties to a suit, and defenses to be raised.

Kaufman & Company’s real estate lawyers have deep experience in the complexities of construction law liability, including that which relates to the complexities and continuing changes in statutes of repose cases.
Kaufman & Company, LLC